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A Stochastic Model for the Measurement of Electricity Outage Costs

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Listed:
  • Abraham Grosfeld-Nir
  • Asher Tishler

Abstract

The measurement of customer outage costs has recently become an important subject of research for the electric utilities. This paper uses a stochastic dynamic model as the starting point in developing a market-based method for the evaluation of outage costs. Specifically, the model postulates that once an electricity outage occurs, all production activity stops. Full production is resumed once the electricity outage is over. This process repeats itself indefinitely. The business customer maximizes his expected discounted profits (the expected value of the firm), taking into account his limited ability to respond to repeated random electricity outages. The model is applied to 11 industrial branches in Israel. The estimates exhibit a large variation across branches.

Suggested Citation

  • Abraham Grosfeld-Nir & Asher Tishler, 1993. "A Stochastic Model for the Measurement of Electricity Outage Costs," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 157-174.
    • Handle: RePEc:aen:journl:1993v14-02-a08
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    Citations

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    Cited by:

    1. Kanudia, Amit & Shukla, PR, 1998. "Modelling of Uncertainties and Price Elastic Demands in Energy-environment Planning for India," Omega, Elsevier, vol. 26(3), pages 409-423, June.
    2. Dong, C. & Huang, G.H. & Cai, Y.P. & Xu, Y., 2011. "An interval-parameter minimax regret programming approach for power management systems planning under uncertainty," Applied Energy, Elsevier, vol. 88(8), pages 2835-2845, August.
    3. Sun, Tianqing & Wang, Xiaohua & Ma, Xianguo, 2009. "Relationship between the economic cost and the reliability of the electric power supply system in city: A case in Shanghai of China," Applied Energy, Elsevier, vol. 86(10), pages 2262-2267, October.
    4. Baarsma, Barbara E. & Hop, J. Peter, 2009. "Pricing power outages in the Netherlands," Energy, Elsevier, vol. 34(9), pages 1378-1386.
    5. Kanudia, Amit & Loulou, Richard, 1998. "Robust responses to climate change via stochastic MARKAL: The case of Quebec," European Journal of Operational Research, Elsevier, vol. 106(1), pages 15-30, April.
    6. Lin, Q.G. & Huang, G.H. & Bass, B. & Qin, X.S., 2009. "IFTEM: An interval-fuzzy two-stage stochastic optimization model for regional energy systems planning under uncertainty," Energy Policy, Elsevier, vol. 37(3), pages 868-878, March.
    7. Tishler, Asher & Woo, Chi-Keung & Lloyd, Debra, 2002. "Reforming Israel's electricity sector," Energy Policy, Elsevier, vol. 30(4), pages 347-353, March.
    8. Cao, M.F. & Huang, G.H. & Lin, Q.G., 2010. "Integer programming with random-boundary intervals for planning municipal power systems," Applied Energy, Elsevier, vol. 87(8), pages 2506-2516, August.

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    JEL classification:

    • F0 - International Economics - - General

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